ACCOUNTABILITY PROBLEMS & SOLUTIONS
- Scripps Howard News Service, April 1, 1998
- The Associated Press, June 11, 1999
- News & Observer, December 7, 1999
- The Associated Press, March 4, 2000
- Major Management Challenges and Program Risks prepared by GAO, January 2001
- Washington Post, July 26, 2001
THE GOVERNMENT IS UNABLE TO ACCOUNT FOR YOUR MONEY
as a whole, the above independent auditor qualifications of U.S. government/agency
financial statements demonstrate decisively the severity and widespread nature of the
government's accounting problems. TGAR members have spent our federal careers flagging these problems
and pushing for reform solutions — through the chain-of-command, around the
chain-of-command, and even with members of Congress. The truth of the matter is
that while everyone is interested in talking about government accounting
reform, no one
will take action to affect government accounting reform.
The following is TGAR’s list of the government's managerial and operational deficiencies that our Government Accounting Prototype (GAP) addresses.
The following paragraphs summarize the above weaknesses and help to explain current government difficulties in designing financial software that is capable of generating meaningful, accurate, and timely financial statements. This government-wide problem contrasts with GAP's ability to easily explain its integrated accounting and budgeting concepts to private and public sector accountants alike. Additionally, GAP's detailed input / output requirements (not illustrated) provide system design personnel with the information needed to design generic software to fit the varying and ever-changing needs of all governments.
The federal government operates under two separate and irreconcilable processes involving a budgeting (cash-based) process and an accounting (accrual-based) process. The current FASAB process does not satisfy either the government's budgeting requirements or even the most basic accounting requirements, as noted above.
TGAR proposes an integrated Government Accounting Prototype (GAP) process that is based upon a private-sector Generally Accepted Accounting Principle (GAAP) standard. GAP's process addresses the inefficiencies and problems resulting from the government's (federal, state, and local) non-integrated processes using two integrated concepts. They are as follows:
GAP addresses this government-induced accounting problem by summarizing all "like" appropriations (A appropriations in this example) in a single set of corporate-style financial statements. GAP's link with the GAAP standard is readily determined because all GAP (government) input / output compares on a one-for-one basis with a corporation.
AND COMPETING ACCOUNTING AND BUDGETING POLICIES
The U.S. government established the Federal Accounting Standards Advisory Board (FASAB) in 1990 for the purpose of recommending and enforcing a single government-wide accounting standard for all federal agencies. FASAB's 9-member board, comprised of the Office of Management and Budget (OMB), General Accounting Office (GAO), Department of the Treasury, and other government and non-government entities establish the government's accounting policies. Fundamental weaknesses in these policies include: (1) "politicking" and the lack of accountants involved in the decision making process, (2) A mishmash of budgeting and accounting policies that do not support or explain summary level input requirements (journal entries), and (3) the absence of a GAAP-style standard to ensure that the output is of any value. e.g. the resultant trial balance (summary of all journal entries) is capable of generating the FASAB's mandated financial statements.
As testament to the failure of FASAB's government accountability initiative, GAO’s March 2001 testimony to Congress revealed that for the fourth consecutive year it was unable to express an opinion on the U.S. government's financial statements, due to material weaknesses. http://www.gao.gov/new.items/d01570t.pdf.
GAP addresses this government accounting deficiency by ensuring that all integrated accounting and budgeting financial statements are generated from a single trial balance. This basic accounting control ensures the integrity of GAP's financial statement totals.
FAILED FINANCIAL SYSTEMS
As background information, in 1987, the Joint Financial Management Improvement Program (JFMIP) recognized that the federal government's antiquated financial management systems were fatally and irreparably flawed. The JFMIP encouraged each federal agency to replace each of its myriad financial systems with software from a few, select private vendors. The fast track approach they chose to accomplish this goal was to place these vendors on a Government Services Agency (GSA) Schedule to virtually eliminate all red tape associated with these purchases. The intent was to standardize the government's financial software as much as practicable with the ultimate goal of generating both the agency's financial statements and also summarizing that data to produce the U.S. government's consolidated financial statements.
Due to the lack of accountants involved in the decision-making process and the absence of a GAAP-style accounting input / output standard, few people questioned JFMIP's ability to adequately test the GSA Schedule financial management software. Thus, the vendors placed on the Schedule did not meet the government's needs simply because no one could define what the requirements were. As a result, agencies were forced to adapt their operations as well as their (now new) systems first to the failed JFMIP standard and then to the failed FASAB standard. GAO's written Congressional testimony has revealed the fatal flaws of these processes.
The GAP model contains detailed generic input / output system requirements (not illustrated) that fulfill the needs of all governments. These requirements are readily tested and contrasted with the government's failed system initiatives.
AGENCY MANAGERS UNWILLING TO RELINQUISH ABILITY TO "COOK THE BOOKS"
One of the benefits of having chaotic, unexplainable, convoluted, and unenforceable government accounting policies, from an agency manger's perspective, is that the books can be endlessly (manually) manipulated. The lack of GAAP-style accountability, government-wide, provides unending opportunities to circumvent Congress's budgeting limitations, steal government assets, switch funds to hide over-spending violations, enter into illegal contracts, and "cover up" an infinite array of other instances to rip-off the government and adjust (or fudge) the books accordingly.
GAP eliminates the possibility of manually fudged totals because the integrated "budgeting" financial statement totals equal individual or combinations of the "accounting" financial statement totals. In order to falsify a total or several totals, there would have to be collusion between the accounting and budgeting offices. Even then, the fudged amounts would be readily detected because the internal GAAP-style formulas would not equal (See Accounting Overview).
SOLUTION TO THE GOVERNMENT BUREAUCRATS FAILED FINANCIAL POLICIES AND FINANCIAL SYSTEM INITIATIVES
The President, Congress, and the American taxpayers are interested in improving the federal government's efficiency, decreasing its costs, and providing a full accounting of our tax dollars. Not surprisingly, these same goals exist for all other governments (state, local, and foreign).
GAP is a generic, integrated accounting, budgeting, procurement, and property management process that is easily explained to both accountants and computer design personnel. The resultant generic financial software applies to all government operations. The fundamental problem in explaining these technical requirements to government finance and system managers is twofold: (1) government finance and system managers rarely possess degrees in either accounting or computer-related fields. Thus, there is no basis for communicating obvious accounting deficiencies of fundamental system design flaws. In fact, managers and employees are rewarded for "going along" and even hiding embarrassing agency problems, (2) In 1987, the JFMIP committed the federal government to the failed idea of having "each" agency buy its financial software "off-the-shelf" from one of a number of JFMIP-chosen private sector software vendors. The government's unqualified finance and system managers committed their agencies to spending millions of dollars (and billions government-wide) on software that produced nothing but more government waste and more falsified financial statement totals (as documented in GAO's written testimony to the U.S. Congress).
The beauty of the internet is the freedom it affords in bypassing the bureaucracy and communicating "the specifics" of the government's failed accountability initiatives to the people who can effect the necessary changes to provide a full accounting of our tax dollars - the President, Congress, and the American taxpayer.
The open-source initiative is another vehicle that would provide a "needed" breath of fresh air into the government's dark and dingy financial policy decision-making process. What better way to acknowledge the merits of GAP or to improve upon its generic, integrated policies than to have them reviewed -- by anyone?
In short, there are a myriad of reasons why governments have never provided a full accounting of our tax dollars. Likewise, there are definitive steps that we can take in ending this cycle of waste and abuse if we are open-minded and willing to share our ideas for improving our government -- at all levels.
© Copyright 1999 Larry Fisher